Reputation based Consensus ~ Simplified

The notion of a “trustless” ledger continues to gain in popularity. A public blockchain is often described in this way as it does not require a “trusted” third party. The responsibilities of third parties such as banks, payment or credit card providers is to act as the authority that prevents double spending. Blockchains on the other hand, use various types of consensus mechanisms to reach an agreement on the ledger and to authenticate each transaction. Ironically, trust is still a factor in trustless systems, with trust derived not from a central system but from decentralized consensus.

Trust

The cost to attack a decentralized consensus mechanism is directly related to its security. To increase security, Nexus implements reputation as a cost, which is related to how much consistent time a staker contributes resources. A mechanism called “Trust” records past work to create a reputation system, which is currently implemented on the Nexus Proof of Stake channel.

Proof of Stake is a form of mining based on ownership of a digital currency. This ownership represents a “stake” in the sense of an interest in something. By staking, NXS holders earn a NXS Stake Reward. NXS can only be staked inside the official Nexus wallet. In return, stakers are rewarded for operating the wallet (a Nexus node) which provides security to the network.

Trust adds another weighting to the security of the Nexus protocol. A Trust score is defined as the total time a specific user has contributed weight or realtime resources to the network. A Trust score is gradually built over time as one consistently operates a node in an honest, trustworthy, and timely manner to validate transaction data by running a wallet on a computer with continuous internet connection (24 hours a day, 7 days a week). In some circumstances, such as when a node goes offline for a significant period of time, the node’s Trust Score will be reduced. Therefore, one has the incentive to operate a node continually and consistently providing security to the Nexus network.

The Stake Reward rate depends on the node’s Trust Score. The Stake Reward rate is a value that represents your current annual NXS rate of return (%). Unlike most other PoS systems, the Nexus reward rate isn’t constant. The rate starts at 0.5%, and can increase to 3.0% after 12 months of consistent staking. The rate increase is nonlinear, slowing in terms of its increase over time. It takes several weeks of consistent staking to reach 1.0%, and around four months to reach 2.0%. With this rate, you can calculate the average amount of NXS you can expect to receive each day for staking.

The key to a good reputation system lies in the effort required in gaining a reputation versus the comparative ease of losing it. By coupling an economic incentive with greater trust, such as higher returns on verification, there is a non-trivial cost incurred by loss of reputation. Trust in our implementation is gained by consistent block production within a three day moving window. If this time is exceeded, the value of trust decays at a rate of 3x, which means if a node misses one day of staking, it receives a penalty of three days worth of lost trust. This mechanism forms a basic foundation for the discernment of the quality of nodes.

It is possible to stake with only one single NXS at a rate of 0.5%. However, as of 15th April 2019, it takes at least ten thousand NXS to be able to reach the maximum stake reward of 3.0%. The amount of NXS required to achieve a higher stake reward depends on its fiat price, as an increase in the price of NXS increases the required amount to attain the maximum stake reward. Trust supports the viewpoint that “not everyone has money, but everyone has time,” implying that anyone can build trust if they have some time, as only a minimal amount of hardware and NXS is required to begin building a trust score.

Similar to other forms of mining, Proof of Stake mining has a level of difficulty. As more people successfully stake on the network, the difficulty of staking increases. This results in an increasing amount of NXS required to increase the stake reward. Furthermore, a larger balance of NXS in the wallet will increase the frequency of NXS rewards.

Trust adds a layer of protection against attacks that further increases the Nexus network’s Byzantine Fault Tolerance. Together with the other two Nexus mining channels, limitations on block frequency, ten-minute decentralized checkpoints, it is very unlikely for an attacker to perform a successful 51% attack, because it would take an enormous amount of resources and time to gain enough trust from the network, in order to take control of all three channels. Not only does Trust increase the security of the protocol, it also increases the efficiency of the protocol and therefore its potential to scale.

Extending Trust

We believe reputation is an important mechanism to take into consideration when discerning the mathematical truth of a decentralized consensus. Reputation in Tritium will extend beyond just Trust, by implementing signature chains. A signature chain is comparable to having a personal blockchain, which can be accessed by a username, password and pin, and augmented with various hardware password managers or biometric usernames. The result is a transparent ledger of events associated with a given user, that can provide the data set to form more complex reputation systems interpreted from this series of events. We plan on extending our current reputation systems into many more areas, such as our multidimensional chain.